Revenue Publishes Informational Bulletin on Utilities Used in Manufacturing, Production, Recycling, Floriculture and Arboriculture

SUBJECT: Application of Sales Tax to Sales of Utilities Used in Manufacturing, Production, Recycling, Floriculture, and Arboriculture

DIGEST OF CHANGES: Provides exclusion from sales tax for utilities predominately used for recycling, processing, repairing, floriculture, or arboriculture.

IC 6-2.5-4-5 provides that a power subsidiary or person engaged as a public utility is not a retail merchant making a retail transaction when it sells electrical energy, natural or artificial gas, water, steam, or steam heat to a person for use in manufacturing, mining, production, refining, oil extraction, mineral extraction, irrigation, agriculture, or horticulture. This provision applies to those engaged in recycling after Dec. 31, 2011, and those engaged in processing, repairing, floriculture, and arboriculture after Dec. 31, 2012.

Sales and use tax is imposed when property is acquired from a retail merchant in a retail transaction. Because this law excludes certain utility sales from being retail transactions, they cannot be subject to sales or use tax. This exclusion applies when the sales of the utility are (1) by public utilities or power subsidiaries; (2) used in manufacturing, production, etc.; and (3) either separately metered or predominately used in an excluded manner.

Utilities purchased by a landlord, when they are used by a tenant engaged in manufacturing on leased premises and when the tenant makes a monthly payment to the landlord for utilities consumed, are not exempt from the sales tax.

See the bulletin here:

http://www.in.gov/legislative/iac/20120530-IR-045120251NRA.xml.html